§ 51:2397 — Certain unlawful activities

A.(1) As used in this Chapter, unless the context otherwise requires:
(a) "Advisor" means a person who regularly provides legal, accounting, or management services or advice to a licensee.
(b) "Associate" means, if used with respect to a licensee:
(i) A controlling person, director, manager, officer, agent, or advisor of that licensee.
(ii) A director, officer, manager, or partner of a person referred to in Item (i) of this Subparagraph.
(iii) A person who controls, is controlled by, or is under common control with a person referred to in Item (i) of this Subparagraph, directly or indirectly through one or more intermediaries.
(iv) Any close relative of any person referred to in Item (i) of this Subparagraph.
(v) A person of which a person referred to in Items (i) to (iv) of this Subparagraph is a director, manager, or officer.
(vi) A person in which a person referred to in Items (i) to (iv) of this Subparagraph, or any combination of those persons acting in concert, owns or controls, directly or indirectly, at least twenty percent or greater equity interest.
(c) "Close relative" means parent, child, sibling, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, sister-in-law, grandparent, grandchild, nephew, niece, uncle, or aunt.
(d) "Closing services" means services performed in connection with the providing of financing assistance. "Closing services" includes but is not limited to appraising property and preparing credit reports. "Closing services" does not include a service performed after the providing of financing assistance.
(e) "Short-term financing assistance" means financing assistance with a term of not more than five years.
(2) For the purposes of Subparagraph (1)(b) of this Subsection:
(a) A person who is in a relationship referred to in that Subparagraph within six months before or after a licensee provides financing assistance shall be considered to be in that relationship as of the date that licensee provides that financing assistance.
(b) If a licensee, in order to protect its interests, designates a person to serve as a director of, manager of, officer of, or in any capacity in the management of a business firm to which that licensee provides financing assistance, that person shall not, on that account, be considered to have a relationship with that business firm. This Subparagraph does not apply if the person has, directly or indirectly, any other financial interest in the business firm or if the person, at any time before the licensee provides the financing assistance, served as a director of, manager of, officer of, or in any other capacity in the management of the business firm for a period of thirty days or more.
B. A person shall not willfully make an untrue statement of a material fact in an application or report filed with the commissioner under this Chapter, or willfully omit to state in such an application or report a material fact required to be stated in the application or report.
C. A person having custody of any of the books, accounts, or other records of a licensee shall not willfully refuse to allow the commissioner, upon request, to inspect or make copies of any of those books, accounts, or other records.
D. A person shall not, with intent to deceive a director, manager, officer, employee, auditor, or attorney of a licensee, the commissioner, or a governmental agency make a false entry in the books, accounts, or other records of that licensee, omit to make an entry in those books, accounts, or other records which that person is required to make or alter, conceal, or destroy any of those books, accounts, or other records.
E. A licensee shall not provide, directly or indirectly, financing assistance to an associate of the licensee, except with respect to guarantees and other forms of credit support provided by the licensee in connection with securing funds to be used by the licensee in providing financing assistance to business firms.
F. A licensee shall not provide, directly or indirectly, financing assistance to discharge, or to free other money for use in discharging, in whole or in part, an obligation to an associate of that licensee. This Subsection does not apply to a transaction effected by an associate of a licensee in the normal course of that associate's business involving a line of credit or short-term financing assistance.
G.(1) A licensee shall not provide, directly or indirectly, financing assistance to a business firm to which an associate of that licensee provides financing assistance, either contemporaneously with, or within one year before or after, the providing of financing assistance by the licensee, if the terms on which the licensee provides financing assistance are less favorable to the licensee than the terms on which the associate provides financing assistance to the business firm. If the financing assistance provided by the associate of the licensee is of a different kind from the financing assistance provided by the licensee, the burden shall be on the licensee to prove that the terms on which the licensee provided financing assistance provided by the associate of the licensee is of a different kind from the financing assistance provided by the licensee, and the burden shall be on the licensee to prove that the terms on which the licensee provided financing assistance were at least as favorable to the licensee as the terms on which the associate provided financing assistance to the business firm.
(2) This Subsection does not apply to any of the following:
(a) If the associate is a controlling person of the licensee and is also the only shareholder or member of the licensee.
(b) If the associate is a subsidiary of the licensee.
(c) A transaction effected by an associate of a licensee in the normal course of that associate's business involving a line of credit or short-term financing assistance.
H. An associate of a licensee shall not receive, directly or indirectly, from a person to whom that licensee provides financing assistance, compensation in connection with the providing of that financing assistance or anything of value for procuring, influencing, or attempting to procure or influence the licensee's action with respect to the providing of the financing assistance. This Subsection does not apply to the receipt of fees by an associate of licensee for bona fide closing services performed by that associate if all of the following are true:
(a) The associate, with the consent and knowledge of the person to whom the financing assistance is provided, is designated by the licensee to perform the services.
(b) The services are appropriate and necessary in the circumstances.
(c) The fees for the services are approved as reasonable by the licensee.
(d) The fees for the services are collected by the licensee on behalf of the associate.
I.(1) By such orders or rules the commissioner considers necessary and appropriate, the commissioner may exempt from Subsections E through H of this Section, either unconditionally or upon specified terms and conditions and for specified periods, a person or transaction or class of persons or transactions, if the commissioner finds that the exemption is in the public interest and that the regulation of the person, transaction, or class is not necessary for the purposes of this Chapter.
(2) In exempting a person or transaction or class of persons or transactions, the commissioner shall give consideration, as considered appropriate by the commissioner, to conflict of interest provisions of federal law or regulations that may be applicable to that person or transaction governing participants in federal financing programs.
J.(1) A person who knowingly commits an act which act violates this Section shall be fined not more than ten thousand dollars or shall be imprisoned for not more than one year, or both.
(2) This Subsection does not apply to an act committed or omitted in good faith in conformity with an order, rule, declaratory ruling, or written interpretative opinion of the commissioner, notwithstanding that the order, rule, declaratory ruling, or written interpretative opinion is later amended, rescinded, or repealed, or determined by judicial or other authority to be invalid for any reason.
(3) Nothing in this Chapter limits the power of the state to punish a person for an act which constitutes a crime under any statute.

Legislative History

Acts 1991, No. 506, §1; Acts 2004, No. 806, §1.